'Sell' emerging markets currencies on rally: strategist
The Cyprus bailout has sparked a relief rally, with risk assets doing well, but one strategist sees this as an opportunity to sell
Benoit Anne, head of emerging markets strategy at Societe Generale, believes that the relief rally following the solution found for Cyprus's crisis will be short-lived and says his bias is to take advantage of the rally to "re-establish tactical bearish positions" on emerging market currencies.
"This is because we remain concerned about the global markets backdrop beyond this short-term bounce in risk appetite," he wrote in a market note.
He maintained his bearish view on the Hungarian forint (HUF) and South African rand (ZAR), which he sees as "undermined by poor country fundamentals" and remained cautious towards the Polish zloty (PLN) which has "the potential to come under pressure in the event of a sharp downturn in risk sentiment."
The Russian ruble (RUB) may also come under pressure, "especially as the domestic fundamentals are now deteriorating," according to Anne.
|More from Emergingmarkets.org|
|Gold price target lowered but strategists still bullish|
|Danger of 'sharp selloff' in emerging markets currencies|
|How to trade the risk of rising US interest rates in LatAm|
In Asia, the South Korean won (KRW) "remains a primary target" in his view while in Latin America he is concerned about the sustainability of the recent rally of the Mexican peso (MXN).
Smaller, less liquid currencies are what Anne prefers.He identifies the Romanian leu (RON) and Serbian dinar (RSD) in Central and Eastern Europe and says his team of strategists remains "constructive" on Nigeria and Ghana in sub-Saharan Africa.
- Follow us on twitter @emrgingmarkets